A U.S. District Judge on Tuesday sentenced Nikhil Wahi to 10 months in prison, completing part of a historic criminal case involving cryptocurrency. Wahi, the brother of a former Coinbase product manager, was charged with conspiracy in July last year in what prosecutors called the “first-ever case of cryptocurrency insider trading.”
“I made a big mistake, a terrible mistake,” Wahi said Tuesday.
Nikhil pleaded guilty to those charges in September, admitting that his brother, Ishan Wahi, used his position at one of the largest crypto exchanges to leak confidential asset listing information. Ishan would notify Nikhil when a coin should be listed on Coinbase. And in response, Nikhil bought up stakes in the cryptocurrencies just before they surfaced on the popular exchange via an anonymous wallet. When coin values inevitably rose following the listing, legitimized by its presence on Coinbase, Nikhil sold the shares at a profit, according to a testimony from the New York Attorney for the Southern States.
“Today’s ruling makes it clear that the cryptocurrency markets are not lawless,” said prosecutor Damian Williams.
In total, according to a Portal report, Nikhil is said to have made $892,500 from his brother’s illegal advice as he traded ahead of 40 separate Coinbase announcements. He was asked to repay this entire sum as part of his conviction – in addition to the 10 months in prison.
“It’s something I’ll have to live with forever,” Nikhil Wahi told sentencing judge Loretta Preska, according to a Bloomberg report. When his sentence expires, he faces deportation to India. Nikhil’s defense attorneys claimed that her client was motivated by a desire to support his parents in India and pay them back for his US college education, Bloomberg reported.
Ishan and a third party, a friend of Nikhil’s named Sameer Ramani, are also facing criminal charges for insider trading. Ishan pleaded not guilty to his charges and was released on bail in July. His case is pending. Ramani, on the other hand, is not in US custody and is believed to be at large.
“Illegal insider trading has real consequences wherever and whenever it occurs,” prosecutor Williams said. But condemnation and condemnation does not make a robust regulatory system. A crypto insider trading scandal even reached the hallowed halls of Congress earlier this year. The House Ethics Committee fined North Carolina Rep. Madison Cawthorn $15,000 for his apparent illegal advanced knowledge of NASCAR’s failed sponsorship of Let’s Go Brandon Coin and his promotion of the memecoin. Cawthorn was not prosecuted. And as always, there are many scams and scams on the blockchain. FTX CEO Sam Bankman-Fried’s fraud trial is set for October.
It was mostly a stroke of luck that the Wahi brothers were caught. Twitter user @cobie noticed a sketchy Ethereum purchase and posted about it. “Found an ETH address that has bought hundreds of thousands of dollars worth of tokens that exclusively appeared in the Coinbase Asset Listing post about 24 hours before it was published,” @cobie tweeted on April 12, according to a report by The Verge . A day later Coinbase’s responded the Chief Security Executive to say that the exchange was investigating. Other tweets have pointed out similar anomalies, although these tweets have not resulted in any arrests.